Work | 27.02.2008

Booming Sales Don't Keep German Companies From Cutting Jobs

German workers have been buried in bad news as companies announce major job cuts. On Wednesday, Feb. 27, BMW and Henkel joined Siemens in slashing thousands of jobs.

Luxury German carmaker BMW said it was cutting 8,100 jobs as part of a restructuring effort aimed at boosting the group's profits. The company booked record sales of 56 billion euros ($83 billion) in 2007, an increase of 14.3 percent over the year before.

The Munich-based company said 5,000 of the planned job cuts would affect temporary employees and a total of 600 would be slashed in the carmaker's international operations. A total of 2,500 cuts in full-time positions would affect workers in Germany.

Voluntary departures and non-replacement of workers who retire would make up for most of the lost positions, BMW board member Ernst Baumann said in a statement.

BMW, which is the world's leading luxury carmaker, foreshadowed moves to cut its workforce as part of an announcement it made at the end of December. At the time, however, the company did not provide any details.

BMW share price falls

The move to reduce its workforce, which totals over 100,000, came ahead of the release next month of its latest earnings results and follows the publication of figures showing booming sales of BMW cars.

But analysts have been complaining that BMW's pre-tax return on sales has been lagging behind other premium car groups, including Mercedes. BMW shares were down by about 2 percent at 36.65 euros ($55.12) after the company set out the details of the job cuts.

The German trade union IG Metall was critical of the company's plans.

"Mr. Baumann obviously believes that he can be a troublemaker and boost the share price by keeping workers permanently insecure," Werner Neugebauer, head of the union's Bavarian chapter, said a statement.

Neugebauer added that he doubted the company would be able to find enough employees willing to retire early. IG Metall said it had an agreement with the union that would prevent full-time employees from being forced out of their jobs.

Better-then-expected profits were also not enough to save 3,000 jobs at German chemical group Henkel. It announced plans to cut 3,000 jobs and sell its position in a US affiliate to deal with rising raw material costs and stiff competition.

The job cuts will cost about 500 million euros in the short-term, the company said, but lead to annual post-2011 savings of 150 million euros. In a statement, Henkel said it was still working out the details of the cuts and would discuss the measure with labor unions.

Henkel currently employs about 52,000 people, 80 percent of whom are located outside Germany.

"With this step, we are responding early and responsibly to the ever faster changes in our markets," Henkel chief Ulrich Lehner told AFP. "This way, we prepare for oncoming developments and ensure the future viability of our company from a position of strength."

Also on Wednesday, Henkel said its net profits increased by 8 percent in 2007 to 941 million euros. Sales also passed the 13 billion euro mark, a rise of 2.6 percent.

Cuts not contradictory to profits

Announcing job cuts at the same time as increased sales is not contradictory, according to Roland Doehn of the RWI economic research institute in Essen.

"The companies are forced to do it in order to stay ahead of the competition," he told the AP news agency. "To say: 'We have good profits and are satisfied, we're not going to do what the competition does' is very problematic."